Fines, or iron ore dusts, are smaller than 10mm, are produced when lumps are dug out from mines. Only few steelmakers are equipped to use them to make steel, such as the pellet-based facilities of JSW Steel, JSW ISPAT and Essar Steel. As a result, much of the fines were being exported to China.

The Centre's recent move is seen as an attempt to reinforce the implicit ban on sale of captive resources, simultaneously pushing owners of captive iron ore mines to invest in adding value to the ore, they own.

It has sought the Law Ministry's approval on the same.

The Jharkhand HC in February had held that the state wasn't empowered to issue such notifications under the existing Mines and Minerals (Development and Regulation) Act. It was the Centre that is empowered to amend or introduce rules and laws.

In August last year, when Arjun Munda led government in Jharkhand allowed the two steelmakers to sell fines from the mines that were allotted to them for captive use, the political parties that formed the opposition had cried foul.

This was despite the state government direction that the one time sale would only be allowed to local firms, with Jharkhand businesses given priority. The state government was accused of selling out. It even inspired an unusual silent protest by MLA in the Jharkhand assembly.

Senior Jharkhand Mines Department officials said the state had sought its legal department's view before it decided on the next course of action after the court order. The government had defended its action, pleading environmental hazard.

SAIL at its Gua mines in Jharkhand had for example piled up 196.50 lakh tones of fines. It has also put out tenders for their sale. "We have plans to put up a four million tonne pellet plant, but that will take a few years," a senior official said on conditions of anonymity. We only wanted to reduce this pile to minimise the environmental pollution."

Welcoming the move, the Secretary General of the Federation of Indian Mineral Industries said, "Allowing sale of fines would be a violation of the conditions under which the state was making a lease recommendation. It cannot be allowed."

According to an official in the Mines ministry, captive owners who have access to iron ore at a production cost of 600 -800 a tonne can afford to set up a beneficiation plant to increase its ferrous content and pelletize fines for easy transport. Tata Steel has set up its pellet plant close to its steel plant in Jameshedpur

Another miner who was affected by the move, said: "Where will we get space as the Environment (and Forest ) Ministry is reluctant to grant fresh forest land for mineral processing."